Shell's UK corporation tax bill tumbles by nearly 90 per cent as company invests more in North Sea and production declines

Rough seas: The Kulluk drilling rig ran aground off the coast of Alaska

Shell's UK corporation tax bill tumbled by nearly 90 per cent to just £55.5m last year, as the company invested more in the North Sea and production declined.

The Anglo-Dutch oil giant also said a report by the US Coastguard, which criticised Shell’s part in an accident involving the Kulluk drilling rig in Alaska, did not mean it was ill-prepared for Arctic drilling.

Shell revealed tax payments in 14 countries, without saying how much profit was made.

A breakdown of the firm’s tax payments showed Shell paid less corporation tax in the UK than in all but two of the countries for which information was released.

Shell’s UK bill fell from £487m last year to £55.5m, less than it paid in Nigeria, Norway, Australia, Malaysia, Canada and Italy.

The firm blamed a 22 per cent fall in North Sea production, after maintenance shutdowns, and low margins in refining and marketing.

Shell also pointed to tax breaks for investment in developing new West of Shetland oil fields.

But analysis over three years showed that Shell’s total UK tax bill since 2011 is far less than what was paid in Norway, Denmark and Nigeria – and only slightly more than what was paid in Italy. ‘This situation is by no means unique amongst operators in the UK North Sea – but what is unique is we choose voluntarily to disclose how much tax we pay in key countries, including the UK,’ Shell said.

‘We expect our recent investments of some $2bn a year to ensure we continue to produce safely from existing assets while investing in new production.’

While Shell paid relatively little corporation tax, the firm did contribute £9bn in indirect taxes, such as VAT and fuel duties on a network of petrol stations. In the UK, such taxes make up about 63pc of prices at the petrol pumps.

The tax disclosure came alongside Shell’s sustainability report into the company’s impact on the environment and communities.

Shell’s public image was tarnished last week by a report from the US Coastguard which criticised readiness for Alaskan Arctic drilling.

The company asked Arctic executive vice president Ann Pickard: ‘Is it possible to reassure people Shell can manage the risks of operating in the Arctic offshore Alaska?’

‘Yes we can,’ she answered, adding that Shell had learned lessons from an internal review into how the Kulluk drilling rig ran aground on New Year’s Eve 2012.

But the US Coastguard assessment of Shell’s preparedness was rather more cutting. The report criticised the plan for towing the Kulluk, saying Shell showed a ‘lack of respect’ for the conditions.

It also said Shell’s decision to tow the Kulluk to Seattle amid rough winter seas was partly motivated by a desire to cut tax, something former boss Peter Voser denied.

Pickard said Shell had since completed an internal review and submitted to a demand from the US Department of the Interior to a full operations plan prior to any new exploration.

‘This has led to a strengthening of our organisation…to achieve safe and responsible exploration,’ she said.

The Arctic drilling programme has been on hold for two years, despite Shell having already pumped £3bn into the project.

The US government estimates the Alaskan offshore could hold about 60bn barrels of oil.